CREATING THE LEADING NORDIC SOCIAL INFRASTRUCTURE PROPERTY COMPANY July 2019
| 2
DISCLAIMER
IN REVIEWING THIS PRESENTATION AND ITS CONTENTS, YOU ARE AGREEING TO ABIDE BY THE TERMS OF THIS DISCLAIMER. THIS PRESENTATION AND ITS CONTENTS ARE BEING MADE AVAILABLE TO EACH RECIPIENT SOLELY FOR ITS INFORMATION AND IS SUBJECT TO AMENDMENT. If you are not the intended recipient of this presentation, please delete and destroy all copies immediately. Failure to comply with these restrictions may constitute a violation of applicable securities laws. This presentation has been prepared and issued by and is the sole responsibility of Samhällsbyggnadsbolaget i Norden AB (the “Company”) and is being furnished to each recipient solely for its own information. The term “presentation” includes the slides that follow, their contents or any part of them. This presentation was prepared solely for informational purposes and does not constitute or form part of, and should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. This presentation should not be construed as a prospectus or offering document and you should not rely upon it or use it to form the definitive basis for any decision, contract, commitment or action whatsoever, with respect to any proposed transaction or otherwise. This presentation is intended to present background information on the Company, its business and the industry in which it operates and is not intended to provide complete disclosure upon which an investment decision could be made. The merit and suitability of an investment in the Company should be independently evaluated and any person considering such an investment in the Company is advised to obtain independent advice as to the legal, tax, accounting, financial, credit and other related advice prior to making an investment. Investors should not subscribe for or purchase any securities on the basis of this presentation. This presentation was prepared and the analyses contained in it based, in part, on certain assumptions made by and information obtained from the Company and/or from other sources. Neither the Company, nor its affiliates, officers, employees, agents or advisors, make any representation or warranty, express or implied, in relation to the fairness, accuracy, completeness or correctness of the information or opinions contained in this presentation or any oral information provided in connection herewith, or any data it generates and accept no responsibility, obligation or liability (whether direct or indirect, in contract, tort or otherwise) in relation to any such information. The Company and its affiliates, officers, employees and agents expressly disclaim any and all liability which may be based on this presentation and any errors or misstatements therein or omissions therefrom. Neither the Company, nor its affiliates, officers, employees or agents, makes any representation or warranty, express or implied, that any transaction has been or may be effected, or as to the achievement or reasonableness of future projections, management targets, estimates, prospects or returns, if any. This presentation contains summary information only and does not purport to be comprehensive and is not intended to be (and should not be used as) the sole basis of any analysis or other evaluation. The information set out in this presentation will be subject to updating, revision, verification and amendment without notice and such information may change materially. Neither the Company, nor its affiliates, directors, officers, employees, agents or advisors is under an obligation to update or keep current the information contained in this presentation or to provide the recipient with access to any additional information that may arise in connection with it, and any opinions expressed in this presentation are subject to change without notice and none of them will have any liability whatsoever (in negligence or otherwise) for any loss whatsoever arising from any use of this presentation or otherwise arising in connection with this presentation. Statements in the document, including those regarding the possible or assumed future or other performance of the Company or its industry or other trend projections, constitute forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties, contingencies, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of the Company. Such factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, there can be no assurance that such forward-looking statements will prove to be correct. You should not place undue reliance on forward-looking statements. They speak only as at the date of the document and the Company undertakes no obligation to update these forward-looking statements. Past performance does not guarantee or predict future performance. Moreover, the Company and its affiliates, officers, employees and agents do not undertake any obligation to review, update or confirm expectations or estimates or to release any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of the presentation. This presentation and any materials distributed in connection with this presentation are not directed to, or intended for distribution to or use by, any person or entity that is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would require any registration or licensing within such jurisdiction. This presentation does not constitute an offer to sell, or a solicitation of an offer to purchase, any securities in the United States. The securities described herein have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in or into the United States, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Within the European Economic Area, this presentation is being made, and is directed only, to persons who are “qualified investors” within the meaning of Article 2(1)(e) of the Prospectus Directive 2003/71/EC and amendments thereto, including Directive 2010/73/EU, as implemented in member states of the European Economic Area or Article 2(e) of the Prospectus Regulation (EU) 2017/1129, as applicable (“Qualified Investors”). This presentation is for information purposes only and does not constitute an offering document or an offer of securities to the public in the United Kingdom to which section 85 of the Financial Services and Markets Act 2000 of the United Kingdom (as amended by the Financial Services Act 2012 of the United Kingdom) applies. It is not intended to provide the bases for any evaluation of any securities and should not be considered as a recommendation that any person should subscribe for or purchase any securities. In the United Kingdom, this presentation is being made, and is directed only, to persons who are both: (i) Qualified Investors; and either (ii) persons falling within the definition of Investment Professionals (contained in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”)) or other persons to whom it may lawfully be communicated in accordance with the Order; or (iii) high net worth bodies corporate, unincorporated associations and partnerships and the trustees of high value trusts, as described in Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “Relevant Persons”). Any investment or investment activity to which this presentation relates is available only to Relevant Persons and will be engaged in only with Relevant Persons. Certain data in this presentation was obtained from various external data sources. While such sources are believed to be reliable, the information contained in this presentation has not been independently verified. Accordingly, the Company makes no representations or warranties, express or implied, as to the accuracy or completeness of that data, and such data involves risks and uncertainties and is subject to change based on various factors. The use of registered trademarks, commercial trademarks and logos or photographic materials within this document are exclusively for illustrative purposes and are not meant to violate the rights of the creators and/or applicable intellectual property laws. The Company’s independent public auditors have neither examined nor compiled this presentation and do not provide any assurance with respect to any information included herein. In light of the risks and uncertainties described above, the future events and circumstances discussed in this presentation might not occur.
| 3
TODAY’S PRESENTERS
• Education: PhD in Social Work (demographics, health care and long term care for the elderly)
• Experience: Deputy CEO and Head of Business Development at Rikshem AB 2011 – 2016
Ilija Batljan
CEO
• Education: Master in Property and Finance, University of Hong Kong
• Experience: Transaction Manager at Rikshem AB and Analyst at NAI Svefa
Oscar Lekander
Business Development Manager
Rosel Ragnarsson Head of Finance
• Education: Degree in Economics, Uppsala University
• Experience: Deputy CEO/ Debt Manager at SLL Interfinans, various management positions at Dexia Stockholm and a number of finance positions at Nordea, Swedbank, SBAB and Citibank
I. Introduction to SBB
| 5
7.6
21.1
25.6
30.3
Q4–2016 Q2–2017 Q2–2018 Q2–2019
SBB – ‘CREATING THE LEADING NORDIC SOCIAL INFRASTRUCTURE PROPERTY COMPANY’
Portfolio has grown from SEK 7.6bn to SEK 30bn+ over 2.5 years… Key pillars of SBB’s story
…whilst delivering strong growth in EPRA NAVps
6.75
10.61
12.69
Q2–2017 Q2–2018 Q2–2019
Unique and non-replicable long-term relationships with municipalities
SEK 30bn low-risk social infrastructure property portfolio
Delivered compelling NAVps growth – 19.6% over the last twelve months
Strong financial position and Investment Grade capital structure
GA
V (S
EKb
n)
EPR
A N
AV
ps
(SEK
)
19.6% Annual growth
57.2% Annual growth
12.69
| 6
SBB AT A GLANCE
Portfolio overview Key figures
1 Refers to community services segment only; 2 Based on current passing NOI, excludes SEK 1,317m value of building rights from total property value; 3 Excluding hybrids; 4 EBITDA defined as Profit before financial items, as per Company accounts (Net Operating Income less Central administration costs plus results from associated companies / JVs); 5 EPRA Earnings adjusted for non-recurring expenses for redeemed loans in advance of SEK 214m pre-tax on an LTM basis, taxed at the Swedish statutory rate of 21.4%
Community Services
Regulated Residential
Other
Stockholm M. Sweden exc. Stockholm Malmö
Oslo
Finland
Denmark
Other
Property split by type
93% Social infrastructure of which 59% community
services and 34% regulated residential
Property split by location
Total social infrastructure:
93%
Continue to grow the portfolio in the largest
Nordic city regions
59% 34%
7%
SEK 30.3bn
26%
33%
14%
7%
5%
1% 14%
SEK 30.3bn
SEK 30.3bn Portfolio value
SEK 9.6bn EPRA NAV
7 years WAULT1
95.4% Occupancy
rate
SEK 1,999m
Passing rent
SEK 1,362m
Passing NOI
4.7%
Net initial yield2
SEK 1,078m
LTM Adj. EBITDA4
SEK 537m
LTM FFO5
43% LTV3
BBB- Stable
S&P and Fitch
790 # assets
| 7
LOW-RISK YIELDING PORTFOLIO UNDERPINNING DEVELOPMENT & TRANSACTION ACTIVITIES
Community Services
Regulated Residential
Developments and Transactions
Backed by SBB’s strong relationship with Nordic municipalities, SBB offers a distinctive opportunity, unlike any competitor, to invest in community service and regulated residential properties, supported by predictable cash flows and further augmented by additive income streams from developments & transactions
1 Passing NOI as of Q2-19 divided by GAV excluding building rights’ values; 2 Last day of trading of its ordinary shares was 18 June 2019
Developments & Transactions
■ Stable community service properties comprising low risk publicly financed tenants, long leases and stable inflation linked contracts
■ Regulated Swedish rental portfolio in areas experiencing population and income growth
■ High reversion opportunity from renovation and refurbishment programmes with minimal capex cost to the company
■ Transaction intensive company with a strong track-record of generating shareholder returns
■ Additional income sources from social infrastructure building rights, renovations and transactions
NIY1:
3.9%
Regulated residential (Rental apartments
in multi-tenant houses)
NIY1:
5.2%
WAULT:
7 years
Community services (Schools, elderly care, LSS housing
and gov. agencies)
1
2
3
2
| 8
NON-REPLICABLE RELATIONSHIP WITH MUNICIPALITIES DRIVING ATTRACTIVE SHAREHOLDER RETURNS THROUGH A COMBINATION OF RECURRING INCOME STREAMS
+
Income from property management
Unique and non-replicable relationship with municipalities
Stable and low-risk rental income from community services and regulated residential properties
Income from renovations
Income from investment driven renovations in the residential and community services portfolios
Target 600 apartments renovations p.a.
Substantial untapped potential remains in the portfolio
Income from transactions
Experienced team with expertise in municipal real estate transactions in the Nordics
Off-market transactions supported by an unparalleled network
Unique business model and competitive advantage to acquire diverse portfolios
Income from social infrastructure building rights
Income from development of building rights for social infrastructure, upon zoning being granted
Income from selectively participating in development JVs
II. Investment highlights
| 10
Differentiated strategy of focusing on low risk social infrastructure offering attractive yields, underpinned by strong relationships with municipalities 1
Rent-regulated residential portfolio ensures low tenant turnover and income stability with significant value upside 2
Additional recurring income streams from developments and transactions that are truly differential 3
Investment grade credit rating ensures broad access to capital markets and financial flexibility 4
INVESTMENT HIGHLIGHTS
Highly experienced management team, scalable platform and reputable owners 5
| 11
7 years WAULT Low tenant turnover 50 year lease recently signed with one
of Sweden’s richest municipalities
Estimated new unit demand in Sweden until 20262
719 New pre-schools
398 New
elementary schools
278 New high schools
700 New senior residences
100 New
hospitals
■ 10-15 years typical lease length for newly signed
leases
■ Majority of tenants in SBB’s community services
portfolio renew their lease, 32% leases expiring in 19-
22 have been in place for >20 years and 68% >10
years1
■ No break clauses
■ Indexed to CPI
COMMUNITY SERVICES PROPERTIES ARE CORE TO THE BUSINESS AND A TRULY UNIQUE ASSET CLASS TO SBB
Attractive demographics
creating demand
Attractive lease terms
492
350 310
201 181 143
Low risk municipality and
governmental tenants B
D C
A
This unique asset class is defined by low risk publicly financed tenants, long leases with low tenant turnover, high demand and attractive lease terms
1 S&P report, "Swedish Real Estate Company Samhallsbyggnadsbolaget I Norden AB Assigned 'BB' Rating; Outlook Stable”, January 2018; 2 Swedish treasury department
Long average tenors and
low tenant turnover
AAA
AAA
Sovereign credit rating
Split by type of asset
Elderly care 26%
LSS (Group Housing)
18% Education
23%
Health care 9%
Municipality houses and
ministry 12%
Police and justice
2%
Offices 9%
Passing rent SEK 1,173m
AAA
Governmental tenants
1%
9% 9%
16%
8%
14%
6% 4%
9% 4%
21%
Norwegian Government
1 Le
ase
exp
iry
(%)
| 12
864
1,398 1,370 1,319
2,560 2,460
2,840
2,320
Health care Education LSS Elderly care
Ren
t (S
EK/s
qm
) fo
r SB
B v
s. r
ents
re
qu
ired
fo
r b
uild
ing
new
pre
mis
es
Column1 New build
SBB’S UNIQUE AND LONG TERM RELATIONSHIP WITH MUNICIPALITIES SUPPORTS CONTINUED PORTFOLIO GROWTH AND UPSIDE
Long history of actively working with several municipalities in Nordics
First transaction completed only 6 months after SBB was founded
History of acquiring from municipalities
Active asset management
Build to suit property
development
Transactions with municipalities
Ongoing discussions with several municipalities for collaboration projects involving development of new community service properties
Opportunity to refurbish/renovate existing assets with rent reversion upside
SBB develops build to suit properties on behalf of municipalities
Borlange: Acquisition of residential and community service properties
Skellefteå: New cultural house acquired for over SEK 1bn with lease contract with Skellefteå Municipality for 50 years
Karlskrona: Acquisition of residential and community service properties
Huddinge: Acquisition of portfolio with education properties
Opportunity to increase market share Long term reliable partner for municipalities
8 out of 10 social infrastructure properties are today in public ownership
Sizeable and addressable market
High barriers to entry
Rent levels higher for new builds
<1
SBB’s market share less than 1%
c.SEK 1,500bn1
1 Management estimate of total community services properties market value in Sweden, Finland, Norway and Denmark. Sweden market value based on data from Svefa Samhällsfastigheter SBB 2018-11-19 report and then extrapolated for other Nordic countries; 2 Newsec report as of July 2019. New build rent levels calculated as the average for Stockholm Prime, Gothenburg Prime, Malmö Prime, Other Major cities and Rest of Sweden
Owned by the public (state, regions and
municipalities) 81%
Owned by private
companies / organisations
18%
1
2
| 13
Regulated Swedish residential market
Rents in the Swedish residential market are regulated
It is based on the ‘Utility Value System’ of the apartment and negotiations between the landlord and a tenancy union
This means that rental levels are not able to be freely set
Rental levels are set as a result of the apartment’s standard and equipment
Rent needs to be set in comparison with similar flats in similar areas, taking into account proximity to the city centre, shops, schools and transportation
Rent levels are likely lower than the level the market would determine independently and the actual willingness-to-pay of the tenants
The Union of Tenants negotiates rents for most tenants in Sweden
Due to the regulated market creating queues for housing, the vacancy risk is almost non-existent
Demand for housing in Sweden is large and the average queue for a rental apartment in Sweden was c. 3 years in 20141, and c. 10 years in Stockholm
At the end of 2018, 640,000 people were in the Stockholm housing queue
Lagging construction has contributed to the excess demand
In a survey carried out by the National Board of Housing, Building and Planning in May-18, 243 of the 288 participating municipalities assessed that there is shortage of housing in their municipality
Growth in Swedish residential properties
Source: Company filings, Statistics Sweden database (SCB), Newsec 1 Report: “Ett land fullt av bostadsköer”, The Swedish Union of Tenants, 2014.
0
20
40
60
80
100
120
140
160
2010 2011 2012 2013 2014 2015 2016 2017
'000
Completed residential properties Population growth
Cumulative housing deficit since 2010
2 SBB OPERATES IN THE ATTRACTIVE SWEDISH RESIDENTIAL RENTAL MARKETS
| 14
RENT-REGULATED RESIDENTIAL PROPERTIES IN SWEDISH GROWTH MUNICIPALITIES
SEK 10.2bn portfolio value
Stockholm
Malmö
Gothenburg
Northern Sweden
Dalarna
Middle Sweden
Sundsvall
Oskarshamn
Karlstad
Borlänge
Motala
Key regions
Distribution by region
SEK 380m Passing NOI
94.6% Occupancy1
SEK 701m Passing rent
~7.1% GIY2
~3.9% NIY2
SEK 13,700 Value per sq.m.3
720k sqm Lettable area
Key property portfolio figures
Key portfolio figures
1 Vacancy mainly due to renovation program; 2 Based on current passing rent and passing NOI, excludes SEK 324m value of building rights from total property value; 3 Based on residential portfolio value of SEK 10.2bn excluding SEK 324m value of building rights
Dalarna 20%
Middle Sweden
39%
Greater Malmo
15%
Greater Stockholm
20%
Northern Sweden
5%
Gothenburg 1%
Passing rent
SEK 701m
1-6 Residential properties acquired
7 Parking lots acquired
2
| 15
RESIDENTIAL PORTFOLIO PROVIDES SIGNIFICANT GROWTH AND VALUE ENHANCING OPPORTUNITIES THROUGH A RANGE OF ACTIVE ASSET MANAGEMENT INITIATIVES
Only Swedish rent regulated residential units1
Focus on cities with favorable demographics such as underlying population growth and high demand for housing
Stable NOI development with upside potential from both rent reversion to market levels and improving margins
Rent regulated Swedish residential market has a widespread shortage of housing
High demand from municipalities for housing - 84% report an additional need for housing, majority have a queue for an apartment
The residential property portfolio has an economic occupancy rate of 94.6%4
Opportunity for SBB to establish itself as the partner of choice to help municipalities meet demand
SBB works actively across the residential portfolio to seek refurbishment and renovation opportunities
Significant upside potential with SBB’s current portfolio valued at SEK 13,700/sqm vs. new construction cost (including land) for new apartments in Sweden of >SEK 45,000/sqm3
Under rented
Under supplied
Development upside
1 Residential markets are not regulated in other Nordic countries; 2 Based on passing rent of SEK 701m of the Residential segment divided by total area; 3SCB; 4Vacancy mostly reflects assets under renovation; 5Boverket reports; 6 Based on number of apartments
Target 600 renovations p.a.
Less than 10% of the portfolio renovated6
c.6-8% yield on cost achieved historically
13,700
45,175
New constructionincluding land
Va
lue
(SEK
/sq
m)
3
43% 52% 63% 83% 87% 84%
2013 2014 2015 2016 2017 2018
84% of municipalities report a need for additional
housing5
975
1,742
New-buildapartments(Sweden)
2
New-build apartment rents in Sweden are above SBB’s levels
Ren
t (S
EK/s
qm
)
3
2
| 16
ADDITIONAL INCOME STREAMS DUE TO UNIQUE AND NON-REPLICABLE RELATIONSHIP WITH MUNICIPALITIES
Income from renovations
Income from social infrastructure building
rights
Income from transactions
Differentiating Income Streams
3
| 17
INCOME FROM RENOVATIONS: UNIQUE RESIDENTIAL RENOVATION BUSINESS MODEL
Apartment type Apartment points
1 room and kitchen cabinet 24
1 room and kitchenette 27
1 room and kitchen 34
1.5 room and kitchen 37
2 rooms and kitchenette 34
2 rooms and kitchen 40
2.5 rooms and kitchen 42
3 rooms and kitchen 44
Example of a residential renovation
𝐴𝑛𝑛𝑢𝑎𝑙 𝑟𝑒𝑛𝑡 = 𝑁𝑜𝑟𝑚𝑎𝑡𝑖𝑣𝑒 𝑟𝑒𝑛𝑡 ∗ (𝐴𝑟𝑒𝑎 + 𝐴𝑝𝑎𝑟𝑡𝑚𝑒𝑛𝑡 𝑝𝑜𝑖𝑛𝑡𝑠) ∗ 77
121
Source: Boverket
Unique residential renovation business model in Sweden
2 rooms and kitchen - 62 sqm
Apartment points = 40
Monthly rent = SEK 4,598
Before
Normative rent = 850 SEK/sqm
𝐀𝐧𝐧𝐮𝐚𝐥 𝐫𝐞𝐧𝐭 = 850 ∗ (62 + 40) ∗ 77
121= 𝐒𝐄𝐊 𝟓𝟓, 𝟏𝟕𝟑
2 rooms and kitchen - 62 sqm
Apartment points = 40
Monthly rent = SEK 6,761
After renovation
Normative rent = 1,250 SEK/sqm
3 rooms and kitchen - 62 sqm
Apartment points = 44
Monthly rent = SEK 7,027
After renovation but with additional space created
Normative rent = 1,250 SEK/sqm
𝐀𝐧𝐧𝐮𝐚𝐥 𝐫𝐞𝐧𝐭 = 1,250 ∗ (62 + 40) ∗ 77
121= 𝐒𝐄𝐊 𝟖𝟏, 𝟏𝟑𝟔
47% increase in rent 53% increase in rent
𝐀𝐧𝐧𝐮𝐚𝐥 𝐫𝐞𝐧𝐭 = 1,250 ∗ (62 + 44) ∗ 77
121= 𝐒𝐄𝐊 𝟖𝟒, 𝟑𝟏𝟖
■ In Sweden regulated residential rents are set through a negotiation process with the Union of Tenants where a normative rent is agreed
■ When a tenant moves out of an apartment, SBB renovates one apartment as a prototype to show the Union of Tenants and to form the basis of the negotiation
■ SBB then when a normative rent is agreed proceeds to renovate the rest of the apartments as tenants terminate their leases and therefore there is a clear visibility on the potential future rental upside
■ Annual rent for an apartment is set based on a formula, comprising the following:
– Normative rent – rental level for a hypothetical apartment of 77 sqm and with 3 rooms
– Area – area for the apartment
– Apartment points – Based on a table (please see on the right), dependent on the number of rooms in the apartment, e.g. an apartment with 2 rooms and a kitchen is equal to 40 points, whilst one with 3 rooms would be equal to 44 points
Renovation process
3
Rent formula
| 18
INCOME FROM RENOVATIONS : SIGNIFICANT VALUE UPSIDE POTENTIAL
Significant development opportunity from existing portfolio Case studies
■ SBB’s residential portfolio comprises 8,600 apartments with a capital value of SEK 13,700 per sqm1
■ SBB has renovated 248 apartments2 over first two quarters of 2019 and has a long-term target of 600 apartments
■ c.6-8% yield on cost achieved historically
Renovated / Refurbished
9%
Remaining stock 91%
Number of apartment renovations
Less than 10% of portfolio renovated Key portfolio figures
138
415
248
600
2017A 2018A Q2-19 Long-term target
8,600 apartments
Property value (SEKm) 10,182
# of apartments 8,600
Renovated (last 2.5 years) 801
Lettable area (k sqm) 720
Average value per sqm (SEK)1 13,700
NOI (SEKm) 380
Average NOI per sqm (SEK) 528
Motala
Tidaholm
■ Residential building in Motala acquired in 2016, holding 476 apartments
■ SBB signed agreement with tenant association for rent after renovation of SEK 1,250/sqm
■ As of Q2-19 SBB has renovated c.80 apartments in the property
■ Average cost of renovation per flat is estimated to be c.5,000 SEK/sqm over time
Avg. rent before (SEK/sqm) c.750
Rent up-lift (SEK/sqm) c.500
% uplift on rent before c.67%
Renovation cost (SEK/sqm) c.5,000
Yield on cost c.10%
Highlights
1 Based on residential portfolio value of SEK 10.2bn excluding SEK 324m value of building rights; 2 Completed or under renovation as of 30 June 2019
■ Residential building in Tidaholm acquired in 2016, holding 231 apartments
■ SBB signed agreement with the Union of Tenants for a normative rent after renovation of SEK/sqm 1,220
■ As of Q2-19 SBB has renovated 56 apartments in the property
■ Average cost of renovation per flat is estimated to be c.5,000 SEK/sqm over time
Highlights
Avg. rent before (SEK/sqm) c.782 Rent up-lift (SEK/sqm) c.439 % uplift on rent before c.56% Renovation cost (SEK/sqm) c.5,000 Yield on cost c.9%
3 #
of
ap
art
men
ts
| 19
INCOME FROM SOCIAL INFRASTRUCTURE BUILDING RIGHTS: ACTIVE APPROACH TO CREATING RISK-ADJUSTED VALUE
SBB’s main focus area
Planning process Sales risk1 Production risk
Process and phasing
1
Business idea
Start zoning plan
Consultation zone plan
Consulta-tion
Zone plan approved/ Validated
Sale Construction
Value growth
Financial risk
3
SBB's role in the residential development process
Falkenberg Bacchus 1 - Two sales of building rights
Case study – Sale of building rights and JV
58,000 sqm total building rights for 700 condominiums
Property/land acquired for SEK 358m in 2016
Sold via two joint ventures, whereby SBB will share in development profit upside in addition to value of building rights sold
SBB estimates to earn c.SEK300m over time from the JVs
18,000 sqm sold to a local consortium, SBB retains 10% ownership in JV
Sale price of building rights of SEK 70m (c.SEK 3,900/sqm)
Current sale status is 103 out of 140 apartments sold. Building 2 out of 4 will be moved-in during Autumn-19
40,000 sqm sold to a JV between SBB and the large and established project developer HSB, SBB retains 50% in JV
Sale price of building rights of SEK 156m (c.SEK3,900/sqm)
Building 1 complete and 2 in Autumn 2019, buildings 3 and 4 to come
2
Phase 1 & 2 Phase 3 Phase 4
1 Relates to sale of apartments
3
| 20
INCOME FROM SOCIAL INFRASTRUCTURE BUILDING RIGHTS: CURRENT DEVELOPMENT PORTFOLIO OFFERS POTENTIAL UPSIDE
Potential value of the development portfolio greater than current book value
Social infrastructure property development portfolio Building rights sales value achieved
Area (sqm)
Value (SEKm)
Value per sqm (SEK)
Planning phase
Total rights area
(sqm) Book value
(SEKm) Value per sqm
(SEK)
Total rights area split (sqm)
Rights sold but not closed
Rights still in portfolio
Phase 1 (project ideas) c.90,100 c.10 c.110 - c.90,100
Phase 2 (pending planning decision) c.91,000 c.50 c.550 c.20,000 c.71,000
Phase 3 (formal planning process) c.658,700 c.800 c.1,220 c.354,050 c.304,600
Phase 4 (zoning plan granted) c.163,050 c.450 c.2,760 c.44,600 c.118,450
Total (all planning stages) 1,002,790 1,317 1,314 418,650 584,140
Rights sold but not closed of 418,650sqm, sales value of c.SEK 1,450m2
Rights still in the portfolio and not sold of 584,140sqm
SBB estimates that the value of building rights upon achieving Phase 4 could potentially exceed book value by SEK 500-750m2, in addition potential profit from JVs could potentially contribute c.SEK 1.0-1.5bn2 upside
1 Current value of income-producing assets related to sites where building rights will be developed; 2 Estimates based on internal management accounts
Rights sold 155,100 394
Rights sold but not closed
418,650 c.1,450
Total rights sold 573,750 c.1,800
2,537
c.3,460
c.3,150
448
1,317
Book value (Q2-19)
Rights sold but notclosed
Rights still in theportfolio
Total right valuepotential upon
Phase 4
Investment needed tobe able to sell the
building rights
Total net value ofrights portfolio
SBB potential shareof profits from JVs
Total potential value
SEK
m
1,766 c.1,4502
Rights
Buildings1
Further upside
potential from JV
development profits
3
| 21
INCOME FROM TRANSACTIONS: TRACK RECORD AND CASE STUDIES
Acquisitions1
Disposals1
729
3,359
5,681
2017 2018 2019YTD
Average profit on cost
c.21%
13,470
3,597
8,864
2017 2018 2019YTD
Case Study - Karlskronahem
Case Study – Drammen Gronland 1
Acquisition value (SEKm) 366
Initial yield at acquisition 5.3%
Highlights ■ In 2018 SBB acquired two
residential and two community services properties from the municipality of Karlskrona
■ Portfolio was acquired for SEK 366m with a rental income of SEK 30.2m and NOI of SEK 19.5m, implying an initial yield of 5.3%
■ In connection with the transaction, SBB signed two new leases (for 10 and 25 years)
Highlights ■ One office building and two
community service properties acquired in 2017 off-market
■ Portfolio acquired for SEK 368m, office asset SEK 165m
■ Early identification of the development potential and zoning plan with the municipality started immediately after closing. Then, SBB offered the asset back to the market as a single fully let office building with development potential
■ In Dec-18 SBB agreed to sell the office asset to a local developer for SEK 249m
Acquisition value (SEKm) 165
Initial yield at acquisition 6.3%
Sale price (SEKm) 249
Initial yield today 4.2%
Profit on cost 51%
Number of properties #
3
Tota
l dis
po
sals
(SE
Km
) To
tal a
cqu
isit
ion
s (S
EKm
)
1 Acquisitions and disposals as per company accounts
| 22
29%
14%
15%
27%
7%
3% 4%
Gross debt:
18,316m
60% 60% 59% 58% 59% 59% 56% 53% 52%43%
62% 61% 63% 63% 63%59% 58% 56%
Q1-17 Q2-17 Q3-17 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q1-19 Q2-19
Reflects 100% of Hybrid Capital
96 bps
105 bps
STRONG BALANCE SHEET POSITION AND ATTRACTIVE FUNDING MIX
Accelerating deleveraging secured an IG rating for SBB
SEKm
Long-dated maturity profile1
57% of the debt portfolio equal to or longer than 4 years
Strong and diverse debt and capital structure
Debt structure Capital structure
Bank loans Secured bonds Unsecured bonds
Commercial paper
Adj Equity ratio4: 46%
Equity Hybrid Capital Bond
Commercial Paper Deferred Tax Other
Decreasing new issue spreads3
All figures in this presentation are for the Group as of 30 June 2019, unless otherwise stated 1 Debt maturity schedule including commercial paper. 2 LTV calculated as net interest-bearing liabilities as a percentage of total assets at the end of the period. 3 Bloomberg data as of 8-Jul-2019. 4 Defined as reported equity incl. shareholder loans and convertibles, with reversal of reported deferred tax liability as a percentage of total assets.
LTV2(%)
4
Bank Loans 0
100
200
300
400
500
600
Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
178 bps
96 bps
SBB 4/6/2020 SBB 1/29/2021 SBB 10/3/2022 SBB 2/14/2024
Confirms investment grade (BBB- / Stable)
confirms BB / positive rating
196 bps Average interest rate
across all debt
3m + STIBOR (in bps)
16%
6%
17%
4%
18%
39%
<1 Yr <2 Yrs <3 Yrs <4 Yrs <5 Yrs >5 Yrs
31%
7%47%
15%
| 23
STRONG MANAGEMENT TEAM AND BOD
Active and hands-on management team with exceptional experience and track-record
Lennart Schuss (CoB) Sven-Olof Johansson Fredrik Svensson Hans Runestam Eva Swartz Grimaldi Anne-Grete Ström-Erichsen
Ilija Batljan CEO
Lars Thagesson Deputy CEO and COO
Krister Karlsson Deputy CEO and Head of Property development
Rosel Ragnarsson Finance Manager
Eva-Lotta Stridh CFO
Oscar Lekander Business development manager
Adrian Westman IR manager
Supported by a highly dedicated and reputable BoD with strong real estate background
21 years in industry 44 years in industry 30 years in industry 18 years in industry
8 years in industry 12 years in industry 34 years in industry
24 years Average experience in the management team
Norwegian Government
5
III. Financial highlights
| 25
UNPRECEDENTED GROWTH AND SHAREHOLDER VALUE CREATION
Solid underlying financial performance… …translating into strong growth in EPRA NAVps …delivering solid ROE1
SBB has consistently generated high returns on equity
Since inception, SBB has delivered strong financial performance and growth both in terms of property
value and operating income driven by active portfolio management and acquisitions
SBB has delivered strong EPRA NAV generation with a total gain of 20% during the last twelve months
All figures in this presentation are for the Group as of 30 June 2019, unless otherwise stated 1 ROE based LTM net profit divided by average equity for the period.
17%16%
18% 18%17%
Q2-18 Q3-18 Q4-18 Q1-19 Q2-19
1,025 1,055 1,071 1,078 1,127
66% 65% 64% 63% 64%
Q2-18 Q3-18 Q4-18 Q1-19 Q2-19
LTM NOI LTM NOI Margin
10.61 11.24 11.55 12.13 12.69
Q2-18 Q3-18 Q4-18 Q1-19 Q2-19
| 26
KEY FINANCIAL HIGHLIGHTS
LTM Gross rental income SEK 1,773m
Property value SEK 30,331m
LTM NOI-margin
64%
Net Initial Yield 4.7%
Adj. LTM FFO3 / Adjusted for Hybrid4
SEK 537m / SEK 388m
LTV / LTV incl. Hybrid
43% / 56%
All figures in this presentation are for the Group as of 30 June 2019, unless otherwise state. Other includes Other & Property Development 1 Excluding building rights of SEK 251m in Community Service and 324m in Residential and SEK 742m in Other. 2 EBITDA defined as Profit before financial items, as per Company accounts (Net Operating Income less Central administration costs plus results from associated companies / JVs). 3 EPRA Earnings adjusted for non-recurring expenses for redeemed loans in advance of SEK 214m pre-tax on an LTM basis, taxed at the Swedish statutory rate of 21.4%. 4 LTM Adj. FFO, deducting dividends paid to hybrid bonds of SEK 149m over the last twelve months. 5 Year-on-year growth in EPRA NAV per share.
Portfolio Level KPI Key Operating Items Portfolio Value and Balance Sheet
Leasable area 1,797 k sq.m.
LTM EBITDA2
SEK 1,078m
Value per square meter
SEK 16,875
SEK 17,854m SEK 10,182m
SEK 20,3631 SEK 13,7001 80% 53%
5.2%
SEK 1,011m SEK 573m 864 k sq.m. 720 k sq.m.
Community Service
Residential
Economic Occupancy 95%
95% 98%
WAULT 7 Yrs Other
213 k sq.m.
SEK 7,2781
4.4% 3.9%
83%
n.m.
SEK 189m SEK 2,295
EPRA NAV per share
SEK 12.69
(SEK 10.61) +20%5
Avg. Cost of Debt
1.96% BBB-
Stable Rating
IV. Green initiatives
| 28
SUPPORTING THE TRANSITION TOWARDS A MORE SUSTAINABLE WORLD
Environmental initiatives employed
A definite environmental perspective
should permeate all of SBB’s properties
Prioritize real estate development in best
communication nodes for track based
traffic
In 2017 follow-up, mapping and selection of
areas to be able to reduce CO2 emissions
Core focus to decrease CO2 emissions by at
least 400 tonnes per year between 2018-
2023
SEKm
Focus on reducing CO2 within the property portfolio
Social engagement
SBB prioritizes social efforts for young people
The company is offering summer jobs to youths living in SBB's residential areas which connects all of the
dimensions of sustainability:
Nicer external environments in SBB’s residential areas
Reduce wastage of our shared resources
Contribute to our long-term operating net profit and creates a link to the youth employment in
the market
The company is a proud to actively contribute to Mentor Sverige
Employees are SBB’s most important assets. It is through the employees’ involvement, development and
competence that the corporate culture thrives
Power consumption
Case study – Tellus 1, Motala
In the beginning of February, SBB announce that it is initiating investments in a unique project that will decrease CO2 emissions by 75% in a residential area with 476 apartments in Motala, Sweden
Expect to achieve a reduction of CO2 by using heat pumps and heat recovery from exhaust air and wastewater
Cooperation with Watts2You1 to develop solar energy modules that can be used to operate our heat pumps
Expect to decrease energy consumption by at least 50%
“
1 Watts2You AB and its founder Lars G Josefsson is developing a new and innovative product for the global residential energy sector. The product integrates solar cells, battery, micro-inverter and electronics in one modular unit. The product provides an autonomous possibility of self-supply of electricity 24 hours a day, 7 days a week. Due to the integrated build-up, and modular construction, the unit and the installation costs will be minimal. The product effectively enables the transition to renewable energy and is an important contributor to the stabilization of the grid
Tellus 1, Motala
6,864 6,639
2017 2018 2019E 2020E 2021E 2022E
Portfolio CO2 emissions (tons/year)
Domestic hot water 21%
Building electricity 10%
Domestic heating 68%
Heating from oil
1%
42,897 41,493
2017 2018 2019E 2020E 2021E 2022E
Total portfolio energy consumption/year (MWh)
| 29
By setting up a green bond framework, aligned with the Green Bond Principles published in June 2018 by the International Capital Market Association, SBB offers investors further insights into the company’s sustainability strategy and commitments and thereby an opportunity to support the transition to a low carbon economy
On 14 February 2019 SBB issued its first senior unsecured green bond and the transaction was rated by S&P with an overall score of 64, which equates to E2 on S&P’s scale of E1 to E4. The SEK 500m bond with a tenor of five year and a spread of 3.3% will continue to support SBB’s improved financial liquidity and financial cost structure
Energy efficiency investments to reduce energy consumption by at least 30% annually
Sustainable living investments in climate resilience, improvements in tenant functionalities and modernization of interior
Process for project/asset
evaluation
Eligible assets have been reviewed by SBB’s Business Controller team and Green Bond Committee
Treasury Department is responsible for allocations to the relevant and approved assets and their related investments
Separate Account to ensure separate monitoring of the investments
Newsletter summarizing energy efficiency investments undertaken during each year
Management of proceeds
Use of Proceeds
1
2
3
Reporting and Transparency
4
Green Bond Framework aligned with the Green Bond Principles Green property portfolio
Letten 1,2,5 & 6, Karlstad - 244 apartments
Stensiken 1, Tidaholm - 234 apartments
Tellus 1, Motala - 476 apartments
SUSTAINABLE FINANCING SOURCES
E1
E2
E3
E4
100
0
Overall Score
E2/64 Weighted aggregate of three (Transparency + Governance + Mitigation)
Source: Samhällsbyggnadsbolaget i Norden AB (publ) – Green Bond Framework published 15 June 2018
| 30
THANK YOU!
Appendix – Supporting materials
| 32
CAPITAL STRUCTURE OVERVIEW
Overview of existing financing as of 30-Jun-2019 Commentary
Overview of share capital as of 30-Jun-2019
As of Q2 2019 the company had unutilised credit facilities totaling SEK 3,200m and cash and cash equivalents of SEK 2,691m
During Q2 2019, SBB replaced several smaller loans with larger credit facilities in conjunction with Nordic banks
SBB’s average interest rate on a 12-months rolling basis has decreased from 2.93% to 1.96%
SBB is rated BBB- (stable outlook) investment grade by S&P and Fitch
At the beginning of Q2 2019, a €300m hybrid bond was issued, with a non-call period of 5.25 years and fixed 4.625% coupon
Company reported LTV, classifying all hybrids of SEK 5.0bn as equity, was 43% while accounting the hybrids as debt-like leads LTV to 56%
In April, the company established a €2.5bn EMTN programme
During Q2 2019, SBB has issued 4 bonds under the EMTN programme
A €500m unsecured bond maturing in 2025 was issued, carrying a fixed interest rate of 1.75%
The fixed interest term on the borrowing was extended by entering into interest rate derivatives totalling SEK 3.2bn
Combined with interest rate derivatives previously entered into, ~91% of loans are hedged with an average maturity of c. 4 years
Source: Company filings, market data as of 8-Jul-2019
The company has 4 different classes of shares
The B-shares are traded on First North Stockholm, and share the economic rights of the voting A-shares
In April, the company completed an issue of ~28m D-shares, raising SEK 860m in proceeds
SEKm Carrying Value
Current interest bearing liabilities
Commercial Paper 2,718
Bonds 87
Bank Loans 131
Total current 2,936
Non-current interest bearing liabilities
Bonds 9,848
Bank Loans 5,532
Total non-current 15,380
Total interest bearing liabilities 18,316
Cash and cash equivalents (2,691)
Net interest bearing liabilities 15,625
Hybrids Classified as Equity 4,978
Key Credit Statistics
Total assets 36,544
LTV (%) 43%
LTV incl. 100% hybrids (%) 56%
ICR (x) 2.2 x
Undrawn credit facilities 3,200
SEKm
Vote
per share No of shares Dividend Price per share
A-shares 1 210.0m Ordinary A/B -
B-shares 0.1 546.1m Ordinary A/B 12.9
D-shares 0.1 73.4m Min. of 5x A/B and SEK 2 p.a. 33.4
Preference shares 0.1 0.2m SEK 35 p.a. 664.0
| 33
CEO
Legal, IT and Investor Relations Management
(outsourced)
Finance and accounting Property management Property development
Capital markets Accounting Asset management Refurbishment and
sustainability Business
development
Consolidated accounting
Financial control
Financial management (outsourced to
Newsec)
Region North (Falun)
Region East (Nyköping)
Region South (Oskarshamn)
Region West (Göteborg)
Norway
Finland
Denmark
Analysis & transactions
STRONG IN-HOUSE CAPABILITIES
| 34
EXAMPLE OF PARTNERSHIP WITH MUNICIPALITIES - SKELLEFTEÅ MUNICIPALITY
Summary Comments
94%
0%
6%
Lettable area
Office Other
Established a partnership with the municipality of Skellefteå regarding a new culture house and including a congress hall
Skellefteå is one of the richest municipalities in Sweden and have decided to invest in a new culture house to improve the quality of the local area
Over the coming years, the company Northvolt will invest more than SEK 30 billion in the municipality to create the world’s greenest battery factory
Skellefteå will take full responsibility for designing the building as well as for any potential cost overruns in the development
The municipality decided to dispose of the asset due to their internal debt limitations, which all municipalities have, meaning that the municipality has restrictions on how much of their own balance sheet they can invest
The building, designed by White architects, will be one the tallest buildings in the world and constructed entirely from wood
As a part of the partnership a 50 year lease contract has been signed between SBB and the municipality, the contract is fully linked to CPI
The municipality will take full responsibility for the property management of the property, whilst SBB together with the municipality will produce a maintenance plan for the next five years, which the municipality will follow
Number of properties 1
Property name Skellefteå Perseus 6
Leasable area Approx. 25 000 sqm
Municipality Skellefteå
County Västerbotten